RBI governor Urjit Patel steps down citing personal reasons. All you need to know

By Prarthana Mitra

Weeks after the fight between the central bank and the central government came into the limelight, RBI governor Urjit Patel resigned on Monday “on account of personal reasons”. Patel’s resignation may seem a sudden move to many, but according to sources close to the development, it was rumoured to have been on the cards since the controversy over the Narendra Modi-led Centre allegedly interfering in the banking regulator’s autonomy.

Patel stepped down on Monday with a brief statement, saying the resignation comes into effect immediately. He had assumed charge as the RBI chief on September 4, 2016.

Political slug-fest begins

Immediately after Patel announced his resignation, the Congress tweeted: “Another one bites the dust,” referring to the BJP government’s assault on democratic institutions including the Supreme Court, the CBI and the RBI. Congress leader Ahmed Patel also lambasted the government for trampling all over RBI’s operations. Calling Patel’s sudden departure “a blot on India’s monetary & banking system” he accused the BJP government of unleashing “a defacto financial emergency”.  “The country’s reputation and credibility is now at stake,” Ahmed Patel further said.

Saddened but not surprised, former Union Finance Minister and senior Congress leader P. Chidambaram tweeted, “No self respecting scholar or academic can work in this government.”

“November 19 was the day of reckoning. Dr Patel should have resigned on that day,” he added, referring to the day Prime Minister Narendra Modi rolled out demonetisation without seeking consultation with the country’s top economists, all of whom are now against the note ban.

The ruling Congress government in Karnataka lashed out on Twitter against what it regards as Modi’s attempt to “sabotage institutions to push his own MODIfied economic theories.” “No educated economist can tolerate such attempts of amateurs,” the official tweet read.

“RBI governor Urjit Patel has been eased out since he refused to allow the Modi govt to plunder Rs Three lakh crore of RBI reserves. Now Modi govt will get a more pliable RBI governor who will allow this loot,” Delhi Chief Minister Arvind Kejriwal tweeted, referring to the issue of surplus transfer that has caused severe tension between the centre and RBI in the last couple of months.

“Taking away reserves from RBI to save your skin is an act against this nation. I’m very proud that people from all walks of life and institutions are standing up to it,” Congress president Rahul Gandhi was quoted as saying by ANI.

“All Indians should be concerned,” ex-RBI governor Raghuram Rajan further told Reuters, adding, “I think his statement should be respected. We should go into the details on why there was an impasse which forced him to take this ultimate decision.”

How the Centre reacted

Disregarding the criticism, Modi tweeted Monday evening about Patel’s “great legacy.” “Dr. Urjit Patel is a thorough professional with impeccable integrity. He has been in the Reserve Bank of India for about 6 years as Deputy Governor and Governor. He leaves behind a great legacy. We will miss him immensely,” Modi said in a series of tweets.” “Dr Urjit Patel is an economist of a very high calibre with a deep and insightful understanding of macro-economic issues. He steered the banking system from chaos to order and ensured discipline. Under his leadership, the RBI brought financial stability,” he added.

“The government acknowledges with deep sense of appreciation the services rendered by Dr Urjit Patel to this country both in his capacity as the Governor and the Deputy Governor of The RBI. It was a pleasure for me to deal with him and benefit from his scholarship,” Finance Minister Arun Jaitley tweeted.

There is no word regarding who will replace Patel as of yet. The news of Deputy governor Viral Acharya’s resignation was soon dismissed as rumours.

Why it matters

The move comes after the government undermined the RBI’s role in the country’s economy and went ahead with implementing their own esoteric policies like the note ban and modifying the GDP back series recently. It also arrives shortly after former CEA Aravind Subramanian and former governor Raghuram Rajan resigned from their respective posts.

The autonomy of the RBI is important both for growth and sustainable growth in equity and the economy, which is why several members of the opposition has decided to approach the president over Patel’s resignation. Attacking and trampling institutions like the RBI not only defies logic and sanity but it also proves that the incumbent government at the centre is hell-bent on destroying the independence of these watchdogs.

Prarthana Mitra is a staff writer at Qrius